In the coming months, Europe’s space community will have to admit it must prepare to pay a high price for a major strategic error. For decades, European Space Agency (ESA)-member states and industrial contractors maintained an outdated structure to develop, produce and market the heavy-lift Ariane booster. Europe acquired a largely dominant market share, despite the former USSR’s ambitions. Then came SpaceX, a brand-new player, which is simply revolutionizing the commercial space launch scene.

In June, it became obvious that Europe has made a major collective error, underestimating SpaceX’s capability to successfully market commercial launches at a fraction of Ariane’s costs. Today everyone is trying hard to maximize the impact of an Airbus Group-Safran initiative to form a joint venture and take control of the Ariane program. Jointly, the two groups own two-thirds of the heavy-lift booster and this is most probably just the beginning of a far-reaching consolidation strategy. Today French space agency CNES retains a 34.6% stake in Arianespace, the launcher’s multinational prime contractor, but logically should abandon that role, established by Europe’s space pioneers in the 1970s.

In other words, Ariane, despite an excellent reliability record, suddenly appears too complex and far too expensive. Unless it reacts quickly, the company could be seriously endangered by its new California-based competitor. Arianespace long enjoyed secure revenues, was driven by talented engineers and implicitly took its supremacy for granted. Now comes the wake-up call, exacerbated by the Airbus Group’s and Safran’s joint decision to respond to the new threat. Doing his best to put on a good show, Arianespace Chairman/CEO Stephane Israel says the planned joint venture is “a major milestone for the European [space] launcher industry.” He acknowledges the need to boost the Ariane program’s competitiveness and, to achieve such a priority goal, to simplify an outdated industrial structure. This was long overdue.

In June, Genevieve Fioraso, the French minister in charge of space, candidly admitted the looming U.S. competition had been underestimated. And according to Gerard Brachet, a former head of CNES, the consolidation initiative is good news. Such an industrial restructuring should have taken place a long time ago to overhaul a fragmented production arrangement. Ariane subassemblies are manufactured at 20 industrial sites around Europe.

When the Ariane 1 program was launched, succeeding the European Launcher Development Organization’s ill-fated Europa II, CNES was selected by participating countries as the program’s prime contractor, with France the biggest funding contributor. CNES is a national space agency—not an industrial concern—and it delegated its role to a newly formed company, Arianespace, establishing a complex cross-border work-sharing agreement tied to each participating country’s financial contribution. Eventually, it worked, but today it is endangered by SpaceX, a dwarf with fewer than 4,000 people, a fraction of the European giant’s massive payroll. And this is why Ariane 5 cannot be expected to compete efficiently against the SpaceX Falcon.

The Airbus Group’s chairman/CEO, Tom Enders, and his Safran counterpart, Jean-Pierre Herteman, when unveiling their plan to rapidly establish a space joint venture, used highly diplomatic language, but the reality is significantly harder: This is obviously the first phase of a major consolidation move involving job cuts.

Airbus Group and Safran top executives will seek to assert their freedom of action and, although acknowledging the need to work closely with ESA, will more than ever carefully avoid political interference. This will not be an easy goal, as shown at the event when their agreement was unveiled: The meeting took place at the Elysee Palace and French President Francois Hollande was the star of the show. This says it all.

Now will come technical disagreements, such as solid propulsion versus liquid fuel. In December, ESA member states’ space ministers will meet to review the Ariane program’s latest development, including the upgraded 5ME derivative and the envisioned next-generation Ariane 6. Divergent views on technicalities are expected to make discussions difficult, while participants will certainly still be shaken up by the consolidation-related news. The wake-up call is salutary, but devastating.